Economic recovery

[diablo]

Observation: many nations including our own have had to borrow huge sums of money, which will have grave consequences for funding of health, education, social care, local government services for maybe years to come.

Question: who lent the money?

I have a follow up question, but first I'd like people's answers to that.

The Government issues bonds to raise money. Investors buy the bonds.

 

[dee]

The Government issues bonds to raise money. Investors buy the bonds.

Arent most bonds at negative yield at mo ? Doesnt that only pay positive in massive deflation situations ?

 

[diablo]

Arent most bonds at negative yield at mo ? Doesnt that only pay positive in massive deflation situations ?

Not sure what your point is. If you want to know how governments raised the money. it's by selling bonds.

Irrespective of yield, UK insurance companies and pension funds must hold them and the Bank of England buys a large proportion too.

 

[dee]

Not sure what your point is. If you want to know how governments raised the money. it's by selling bonds.

Irrespective of yield, UK insurance companies and pension funds must hold them and the Bank of England buys a large proportion too.

Wasnt a point, genuine question. I dont know enough about it. Never understood bonds. The returns always seem minimal .

 

[Siusaidh]

Okay, so there are investors with enough money to basically give loans on a scale equivalent to the wealth of many nations?

Who are these people? Sovereign wealth funds? And who actually owns the bulk of those funds? Are pension funds part of that wealth? If so what %?

(I still have a follow up question...)

 

[Siusaidh]

What I'm saying is, if we (and other countries) have to go deeply into debt, that means there must be huge stashes of wealth... vast stashes of wealth... and we're going to have to pay back into those vastly wealthy entities over time?

And being so deep in debt to them, we're going to have to put less into public services than we otherwise would have?

(I still haven't got to my follow up question...)

 

[Siusaidh]

So in the coming years we are going to have to transfer money into these hugely wealthy entities that could otherwise be transferred into our communities and the well-being of almost everybody else?

(Just trying to clarify, before I ask a further point. Any people trained in economics here? Or with a fair grasp?)

 

[websaway]

@websaway some day I hope to meet someone I love as much as you love masks

I love solutions to a problem, and this one, in the absence of a vaccine, is a common sense alternative to buses running with a few people in them. if everyone wears a mask in high density situations it reduces the amount of transmission. Risk management should be the order of the future. If you are 50% likely to die if you get the virus, don't get it, if you are 0.001% likely to die if you get the virus then you may be more than prepared to take the risk. All seems like a common sense way to get things back to " a degree of normality"

 

[newguy]

Car crashes wouldn't happen at all if everybody driving;

1. Gave 100% focus to the road and their surroundings.
2. Rested adequately so they don't fall asleep at the wheel.
3. Avoid reaction inhibiting substances (alcohol or drugs).
   
4. Kept within speed limits.
5. Kept their vehicles well maintained and replaced wearing parts.

Basically, if everybody realised they were in partial control of a machine that causes death, then accidents wouldn't happen. If all of the above were taken into account, there would be very little need for a seat belt in the first instance.

You keep going on about masks as if they are some sort of silver bullet.

People have been asked to stay home. For the most part, government are actually paying people 80% of their salary to make this possible (yes, there are edge cases), but people are treating this like a fucking holiday.

If we can't get people to stay at home when they are being paid to do it, and a considerable amount of people don't follow the law regarding driving a car safely, what hope in hell do we have of 100% of people wearing masks correctly, and washing their hands and surfaces correctly to eradicate this virus?

Drop the "everyone should wear masks, then everything can get back to normal".

Normal doesn't exist anymore. I'm not entirely convinced it will ever return to how things were before the pandemic hit. If it does, then it will happen again.

EVERYBODY needs to take responsibility for themselves and recognise their failings, accept them, change their mindset and lifestyle, and be considerate to others. Otherwise we've learned nothing and we won't move forward.

I think I fall somewhere in between in that I do see wearing a mask in public as a worthwhile step that will likely bring down r0. Much in the same way that you list steps to avoid car crashes, wearing a mask could be seen as a step to try to help avoid spreading covid-19. It's not a panacea though by any means or a reason to act like there isn't a problem, but in some countries it appears to have made a meaningful difference.

You're no doubt right to say that many don't follow the rules anyway, or won't, but we need as much in place that at least can be followed by those looking to stay healthy. Masks, hand sanitiser basically everywhere, limits on the number of people able to enter pubs and restaurants when they eventually open back up, no crowds in any environment. Doing our level best to keep the vulnerable and elderly safe (I do feel like we've failed those in care homes, but then I appreciate it's not easy to find solutions to some problems). If we take things very gradually and are sensible, we may be able to open upa little quicker than we think. If we are not and the r0 rate starts rising again,we're back to square one in some respects.

I tend to be a bit more optimistic about life being fairly normal again at some point. Maybe in a year or two from now, as there a number of routes to that place. Either more effective treatments, a vaccine, or on the grim side, it working its way through the entire population to the point where those most susceptible to it are no longer with us, and those that are are able to fend it off.

 

[Siusaidh]

Okay, let's consider a scenario.

Collectively, the countries of the world take a decision to re-boot the economy to what it was on January 1st.

How? Digitally alter the figures in everyone's accounts, including the nations' accounts.

So tomorrow, May 11th, is actually as if it is January 2nd. The national borrowings haven't happened. People's business and private bank accounts haven't plummeted. It's just January 2nd.

Yes, of course, in the interim period there will be supply issues. But the main economic hit (and what it will do to ordinary people everywhere) no longer takes place on that scale.

The huge Sovereign Wealth funds are paid back. They are back to January 1st too. Presumably if most of that sovereign wealth is people's future pensions, then there's no huge surge of extra money entering the system right now. So inflation wouldn't be automatic.

After all, inflation wasn't automatic on January 1st, so why would it be automatic now?

I'm trying to be really stupid, and ask the stupid questions, because you need to convince me that digitally re-booting everyone wouldn't vastly improve the situation and people's futures.

 

[websaway]

So in the coming years we are going to have to transfer money into these hugely wealthy entities that could otherwise be transferred into our communities and the well-being of almost everybody else?

(Just trying to clarify, before I ask a further point. Any people trained in economics here? Or with a fair grasp?)

You are sounding like a very naïve Marxist. I wouldn't go there, you are opening a can of worms. A can that the last election put a lid on. Read about gilts on Wikipedia, that will give you an insight into an age old way of government raising funds.

 

[websaway]

Okay, let's consider a scenario.

Collectively, the countries of the world take a decision to re-boot the economy to what it was on January 1st.

How? Digitally alter the figures in everyone's accounts, including the nations' accounts.

So tomorrow, May 11th, is actually as if it is January 2nd. The national borrowings haven't happened. People's business and private bank accounts haven't plummeted. It's just January 2nd.

Yes, of course, in the interim period there will be supply issues. But the main economic hit (and what it will do to ordinary people everywhere) no longer takes place on that scale.

The huge Sovereign Wealth funds are paid back. They are back to January 1st too. Presumably if most of that sovereign wealth is people's future pensions, then there's no huge surge of extra money entering the system right now. So inflation wouldn't be automatic.

After all, inflation wasn't automatic on January 1st, so why would it be automatic now?

I'm trying to be really stupid, and ask the stupid questions, because you need to convince me that digitally re-booting everyone wouldn't vastly improve the situation and people's futures.

Would this include the third of a trillion the airlines are losing . Not sure what you mean.

 

[diablo]

So in the coming years we are going to have to transfer money into these hugely wealthy entities that could otherwise be transferred into our communities and the well-being of almost everybody else?

(Just trying to clarify, before I ask a further point. Any people trained in economics here? Or with a fair grasp?)

You could fill a library with books on this subject.

But basically, governments borrow money each and every year to finance public services. If they didn't, we wouldn't have the level of public services we have.

If they didn't borrow the money in the first place, there wouldn't be the money you'd like to see spent in communities, etc.,

And governments don't generally repay debt: they refinance it.

 

[diablo]

Okay, let's consider a scenario.

Collectively, the countries of the world take a decision to re-boot the economy to what it was on January 1st.

How? Digitally alter the figures in everyone's accounts, including the nations' accounts.

So tomorrow, May 11th, is actually as if it is January 2nd. The national borrowings haven't happened. People's business and private bank accounts haven't plummeted. It's just January 2nd.

Yes, of course, in the interim period there will be supply issues. But the main economic hit (and what it will do to ordinary people everywhere) no longer takes place on that scale.

The huge Sovereign Wealth funds are paid back. They are back to January 1st too. Presumably if most of that sovereign wealth is people's future pensions, then there's no huge surge of extra money entering the system right now. So inflation wouldn't be automatic.

After all, inflation wasn't automatic on January 1st, so why would it be automatic now?

I'm trying to be really stupid, and ask the stupid questions, because you need to convince me that digitally re-booting everyone wouldn't vastly improve the situation and people's futures.

Whether you print money or create it digitally, the more you create, the greater the money supply. That is the very definition of inflation.

 

[Siusaidh]

Websaway, I'm not avowing allegiance to any political view. I am asking questions.

Diablo, if you have the same money you had on January 1st, and I have the same money I had on January 1st, and the country has the same money it had on January 1st... where is the extra money? We would have the same as we had on January 1st, and there wasn't significant inflation then, and 'tomorrow is January 2nd'.

Are you saying that most of the world's population must suffer deep recession and austerity, because of a few investors having a spending splurge from being repaid?

But they are also going back to what they had on January 1st, and there was no serious inflation then. Everyone goes back to January 1st including them.

In the end, if so many countries are indebted to these 'centres of wealth', the very small number of people where most wealth accumulates are expendable anyway. The interests of the many have to come first. There is always the option not to pay back the loans/bonds if it's really going to 'somehow' add to inflation - or disinvest them altogether.

Simply run the countries as they all were on January 1st, but without the debt or the wealthy few.

I suspect those radical actions wouldn't be necessary, because I think re-booting to January 1st wouldn't create runaway inflation at all.

Thank you for your thoughts.

 

[websaway]

I guess my point is more trying to compare the relevance.

If you consider (seat belt = face mask) as a comparison within their given scenarios, the seat belt could almost be considered a non-requirement if all other risks were avoided.

Same goes for the face mask. The problem is humans. Either they are selfish, or just lack the intelligence and awareness of cause and reaction. Whatever the reason, when individuals stop conforming, it the becomes small groups, then large groups, which then turns to a majority.

My way of life isn't going to improve because a considerable portion of the population aren't conforming. Same as this "lockdown", and social distancing. It seems quite a large number of people don't understand what it means, or what purpose it's actually serving.

Yes you are right if you were never required to stop suddenly at 30mph when a cat stupidly runs across the road and where a seatbelt could save a life they would not be required. How do we educate the cat though. You'll need to work on that.

 

[websaway]

Training of the cat is not the root issue. Humans domesticating wild animals, or humans not 100% focussed on driving is yet again the issue.

You should be checking your mirrors and surroundings before suddenly stopping anyway, to avoid collisions. Any animal hit is considered minor in comparison. Unfortunate for the cat and pet owner, but if you domesticate a wild animal, you should probably keep it in the house like you would a dog.

Paying 100% attention to your direct and peripheral vision at all times would probably give you enough advantage to seeing the cat prior to it running into your path, giving you ample time to avert incident.

What was it mark twain said
Never argue with a fool, onlookers may not be able to tell the difference.

 

[diablo]

Websaway, I'm not avowing allegiance to any political view. I am asking questions.

Diablo, if you have the same money you had on January 1st, and I have the same money I had on January 1st, and the country has the same money it had on January 1st... where is the extra money? We would have the same as we had on January 1st, and there wasn't significant inflation then, and 'tomorrow is January 2nd'.

Are you saying that most of the world's population must suffer deep recession and austerity, because of a few investors having a spending splurge from being repaid?

But they are also going back to what they had on January 1st, and there was no serious inflation then. Everyone goes back to January 1st including them.

In the end, if so many countries are indebted to these 'centres of wealth', the very small number of people where most wealth accumulates are expendable anyway. The interests of the many have to come first. There is always the option not to pay back the loans/bonds if it's really going to 'somehow' add to inflation - or disinvest them altogether.

Simply run the countries as they all were on January 1st, but without the debt or the wealthy few.

I suspect those radical actions wouldn't be necessary, because I think re-booting to January 1st wouldn't create runaway inflation at all.

Thank you for your thoughts.

Too much for me to untangle I'm afraid! We'll have to agree to differ on the consequences of your plan.

 

[newguy]

I guess my point is more trying to compare the relevance.

If you consider (seat belt = face mask) as a comparison within their given scenarios, the seat belt could almost be considered a non-requirement if all other risks were avoided.

Same goes for the face mask. The problem is humans. Either they are selfish, or just lack the intelligence and awareness of cause and reaction. Whatever the reason, when individuals stop conforming, it the becomes small groups, then large groups, which then turns to a majority.

My way of life isn't going to improve because a considerable portion of the population aren't conforming. Same as this "lockdown", and social distancing. It seems quite a large number of people don't understand what it means, or what purpose it's actually serving.

Yes, you make a good point. I think some cultures are community minded and others more individualistic, and in the latter people soon get bored or suspicious of instruction over time. I think so far the most part in a situation full of unknowables, most people have done the right thing. Going forward though, as things open up, it may well get a bit wild west! If people get too gungho and complacent the r0 will be right back up. We may well end up needing the extra capacity that is now available in hospitals.

 

[Siusaidh]

No probs, Diablo. Just floating left field thoughts. I'm a nurse, not an economist, and I've got enough to do. Never belonged to a political party. Thanks for the conversation.